Problems and Strategies in Services Marketing Author(s): Valarie A. Zeithaml, A. Parasuraman, Leonard L.

Berry Source: The Journal of Marketing, Vol. 49, No. 2 (Spring, 1985), pp. 33-46 Published by: American Marketing Association Stable URL: http://www.jstor.org/stable/1251563 Accessed: 14/01/2010 20:45
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ValarieA. Zeithaml, A. Parasuraman,& Leonard L. Berry

Problems and

Services

Strategiesin Marketing

This articlecompares problems and strategies cited in the services marketingliteraturewith those reported by actual service suppliers in a study conducted by the authors. Discussion centers on several
broad themes that emerge from this comparison and on guidelines for future work in services marketing.

THREE basic assumptions pervadethe growingbody of literature on services marketing.The first holds that a numberof unique characteristics-notably inof productionand consumptangibility,inseparability and tion, heterogeneity, perishability-separate services from tangible goods. The second assumption maintainsthat these characteristics pose vexing problems for servicesmarketers thatare not faced by goods marketers.The third and final assumptionholds that services marketingproblemsrequireservices marketing solutions-that strategies developed from experience in goods marketingare often insufficient. The purposesof this article are: (1) to offer a conceptual framework summarizing the unique characteristicsof services, the problemsstemmingfrom these characteristics,and the strategiessuggested as appropriate to overcome the problems; (2) to report the findings of a national survey of managers of service firms concerningthe problemsthey face and the marketing strategies they use to overcome them; (3) to

comparethe problems and strategies cited in the literaturewith those reportedby managers of services firms; and (4) to offer recommendationsfor the developmentof services marketingthought.

Literatureon Services Marketing

The rationalefor a separatetreatmentof services marketing centers on the existence of a numberof characteristicsof services which are consistently cited in the literature:intangibility, inseparabilityof production and consumption, heterogeneity, and perishability. Figure 1 presents a summary of the references documentingthese differences. The fundamentaldifference universally cited by authors (e.g., Bateson 1977; Berry 1980; Lovelock 1981; Rathmell 1966, 1974; Shostack 1977a) is intangibility.Because services are performances,rather than objects, they cannot be seen, felt, tasted, or touched in the same manner in which goods can be sensed. Intangibility,according to Bateson (1979) is the critical goods-services distinctionfrom which all other differences emerge. volves the simultaneousproductionand consumption which characterizes most services. Whereasgoods are first produced,then sold and then consumed, services are first sold, then produced and consumed simultaInseparability of production and consumption in-

Valarie A.Zeithaml is Assistant Professor of Marketing, A.Parasuraman is Associate Professor of Marketing, andLeonard L.Berry is Professor of Marketing, Texas A&M Theauthors acknowlUniversity. gratefully madeby Gregory andfouranonymous edgethe contributions Upah reviewers.

Journal of Marketing Vol. 49 (Spring 1985), 33-46.

Problems andStrategies in Services Marketing / 33

1 FIGURE References Listing Unique Characteristics of Services'

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'Several authors have disputed the need for a separate treatment of services in marketing. These authors include Bonoma and Mills (1979), Enis and Roering (1981), and Wyckham, Fitzroy,and Mandry (1975).

neously (Regan 1963). Since the customer must be presentduringthe productionof many services (haircuts, airplanetrips), inseparability"forces the buyer into intimate contact with the production process" also (Carmenand Langeard1980, p. 8). Inseparability means that the producerand the seller are the same entity, makingonly directdistribution possible in most cases (Upah 1980) and causing marketing and production to be highly interactive(Gronroos 1978). Heterogeneityconcerns the potentialfor high variof services. The qualityand ability in the performance essence of a service (a medicalexamination, car rental, restaurant meal) can vary from producerto producer, from customerto customer, and from day to day. Heterogeneityin service outputis a particular problemfor labor intensive services. "Many different employees may be in contactwith an individualcustomer,raising a problem of consistency of behavior" (Langeardet al. 1981, p. 16). Service performancefrom the same individualmay also differ: "People's performance day in and day out fluctuates up and down. The level of

consistency that you can count on and try to communicate to the consumer is not a certain thing" (Knisely 1979a, p. 58). Perishabilitymeans that services cannot be saved (Bessom and Jackson 1975, Thomas 1978). Motel rooms not occupied, airline seats not purchased,and telephoneline capacity not used cannotbe reclaimed. Because services are performances that cannot be stored, service businesses frequentlyfind it difficult to synchronize supply and demand. Sometimes too much demand exists (a popularrestauranton a Saturday night) and sometimes too little demand exists (an income tax service in the summer). The literaturesuggests that each unique characteristicof services leads to specific problemsfor service marketersand necessitates special strategies for dealingwith them. Figure2 summarizesthe problems which frequentlystem from each of the four service characteristics. Figure 3 lists the marketingstrategies suggested in the literatureto overcome these problems.

34 / Journal of Marketing, 1985 Spring

2 FIGURE Unique Service Features and Resulting IMarketing Problems

s Unique Service Feature; Resulting Marketing Problems 1. Services cannot be stored. 2. Cannot protect services through patents. 3. Cannot readily display or communicate services. 4. Prices are difficult to set. 1. Consumer involved in production. 2. Other consumers involved in production. 3. Centralized mass production of services difficult. 1. Standardization and quality control difficult to achieve.
1. Services cannot be inventoried.

Intangibility

Selected References Citing Problems Bateson (1977), Berry (1980), Langeard et al. (1981), Sasser (1976) Eiglier and Langeard (1975, 1976), Judd (1968) Rathmell (1974) Dearden (1978), Lovelock (1981), Thomas (1978) Booms and Nyquist (1981) Bateson (1977), George (1977), Gronroos (1978) Sasser et al. (1978), Upah (1980) Berry (1980), Booms and Bitner (1981)
Bateson (1977), Sasser (1976)

Inseparability

Heterogeneity
Perishability

3 FIGURE Suggested Marketing Strategies for Problems Stemming from Unique Service Features
Unique Service Features Marketing Strategies to Solve Problems 1. Stress tangible cues. 2. Use personal sources more than nonpersonal sources. 3. Simulate or stimulate word-of-mouth communications. 4. Create strong organizational image. 5. Use cost accounting to help set prices. 6. Engage in post-purchase communications. 1. Emphasize selection and training of public contact personnel. 2. Manage consumers. 3. Use multisite locations. 1. Industrializeservice.a 2. Customize service. References Citing Strategies Berry (1980), Booms and Bitner (1982), George and Berry (1981), Shostack (1977a) Donnelly (1980), Johnson (1969) Davis, Guiltinan, and Jones (1979), George and Berry (1981) Judd (1968), Knisely (1979a), Thomas (1978), Uhl and Upah (1980) Beard and Hoyle (1976), Dearden (1978) Bessom and Jackson (1975), Fisk (1981), Zeithaml (1981) Berry (1981), Davidson (1978), George (1977), Gronroos (1978) Lovelock (1981) Carman and Langeard (1980), Langeard et al. (1981), Upah (1980) Levitt (1972, 1976) Bell (1981), Berry (1980), Johnson (1981), Regan (1963), Sasser and Arbeit (1978) Lovelock (1981)

Intangibility

Inseparability

Heterogeneity

1. Use strategies to cope with fluctuating demand. Perishability 2. Make simultaneous adjustments in Sasser (1976) demand and capacity to achieve a closer match between the two. "Levitt suggests specifictechniquesto substituteorganizedpreplannedsystems for individualservice operations(e.g., a travel vacationtours to obviatethe need for the selling, tailoring,and haggling involvedin customiagency could offer prepackaged zation).Thisstrategyis the opposite of customization.

Problemsand Strategies in Services Marketing / 35

The Study
The literature review (Figures 2 and 3) provideda basis for developing the questionnaireused in a mail survey of 1,000 service firms. This survey was conductedto determine(1) the extent to which problems reportedto be associated with services actually presentedproblemsfor the sample firms, and (2) the degree to which sample firms used the suggested marketing strategiesto overcome the problems. The Sample A randomsample of 1,000 service firms was selected from Dun and Bradstreet's Million Dollar Directory and cover (Dun and Bradstreet1982). A questionnaire letter were mailed to the president of each firm. A were mailed follow-up letterand second questionnaire Of the original later. to nonrespondents three weeks 1,000 questionnaires,323 (32.3%) were returnedand usable. Table 1 shows the results of chi-squareanalyses performedto determinewhether significant differences existed between respondentand nonrespondent firms in terms of distributionof SIC codes, sales revenue, and number of employees. The tests revealed no significant differences between the two groupson any of the threedimensions, suggestingthat nonresponsebias was negligible. Almost 70% of the respondents filling out the held top managementpositions such as questionnaire CEO, President, and Vice President, while the rest held titles such as MarketingManager,MarketingDirector, and General Manager. The Questionnaire The questionnairecontained three sections. The first section included items classifying service businesses: geographic scope of operations, primary customer group, need for customer's physical presence (Lovelock 1980), and durationof benefits (Lovelock 1980). The second section listed eight items capturingthe essence of what the literaturesuggests are difficulties unique to services (shown in Figure 2): (1) services cannot be stored; (2) services cannot be transported; (3) services cannot be mass produced; (4) services cannot be protectedby patents; (5) service quality is difficult to control; (6) service costs are difficult to calculate;(7) demand for services fluctuates;and (8) consumersthemselves are involved duringthe service productionprocess. In this section, respondentswere asked to indicate on a scale of 1 (no problem at all) to 5 (majorproblem)the extent to which they believed each item createddifficulties in their firms. Partthree listed statements concerning business practices and strategies(see Figure 3) which are frequentlycited in the literature as solutions to service relatedproblems. indicated the extent to which each stateRespondents

ment applied to their firm on a scale ranging from 1 (does not apply to our firm) to 5 (definitely applies to our firm).

Results
For the sample as a whole, mean scores (on a 1 to 5 scale) were calculatedfor each problemarea, business practice,and strategy.'In addition,mean scores across categoriesundereach of the four service classification variables(e.g., geographicscope of operations)were examinedusing a one-way ANOVA model. The general linear model (GLM) procedureof the SAS statistical packagewas employed for this purpose(SAS Institute1983). SignificantANOVA resultswere further investigated using Duncan's multiple range test to identify the categories of firms that differed significantly in terms of their mean scores. Problem Areas Table 2 reportsthe means of the respondents'perceptions concerningthe extent to which service characteristics presentedproblems in their firms. The table also isolates significant differences in perceptions of problemareasamong differenttypes of service firms. Judgingfrom the average responses of all firms, service suppliersdid not consider the eight problems to be of majorconcern to them. Only one problem area receiveda mean ("Thedemandfor servicesfluctuates") scoreexceedingthe midpointon the 5-pointscale. Two problemareas ("Services cannot be stored"and "Services cannot be protected by patents") received extremely low average responses, indicating that most managersfelt them to be of little or no problem in theirfirms. The remainingproblemareasreceived average scores below the midpoint of the scales. The low averagescores were furthersupported by low perof that the centages respondentsreporting problems apply to their firms (indicatedby respondents'checking a 4 or 5 on the problemitems). While 47% of the viewed demandfluctuationas a problem, respondents less than one-quarter perceived any of the remaining seven problems as relevant to their firms (see final columnof Table 2). One possible explanationfor low scoreson these problemareasis that servicefirms may be dealing with them effectively and thereforedo not perceive them to be troublesome. A few significant differences in perceptions of problem areas surfaced among the types of service firms. However, only some of these differences oc'All of these scales were anchored at their end points (i.e., 1 and 5) with the descriptive phrases mentioned earlier. Other points along the scales were not labeled. Subjects were simply instructed to circle the number along the continuum on each scale that came closest to their perception of the statement's relevance to their firm.

36 / Journal of Marketing, 1985 Spring

TABLE 1 Profile of Respondents and Nonrespondents Percentage of Number of Employees: Fewer than 25 25-49 50-99 100-199 200-499 500 and over Not available Respondents 18 14 15 13 13 20 7 100 (base = 323) 10.96; df = 6. No significant difference between respondents and nonrespondents. Percentage of Annual Sales Revenue: Less than $1 million $1 million-less than $5 million $5 million-less than $10 million $10 million-less than $50 million $50 million and over not available Respondents 9 13 10 23 11 34 100 (base = 323) 9.81; df = 5. No significant difference between respondents and nonrespondents. Nonrespondents 14 17 9 15 9 36 100 (base = 677) Nonrespondents 27 13 17 12 12 13 6 100 (base = 677)

X2=

X2=

Percentage of Respondents Nonrespondents Construction 6 8 5 Transportation 5 Utilities 4 4 16 Banking: State banks 13 7 Banking: National banks 6 4 Savings and loans 3 Nonbank credit agencies 3 3 9 Brokerage firms 15 Hotels & lodging places 8 8 Personal services 3 1 Business services 17 16 5 Repair services 4 Recreation 6 9 7 5 100 100 (base = 323) (base = 677) X2= 15.38; df = 13. No significant difference between respondents and nonrespondents. shown in the table are collapsedcategoriesto ensure adequatecell sizes for the chi-squareanalysis. However,to "Categories providemore specificity,industriesfrom which at least two firms respondedare furtherdetailed below: Contractors: general contractors, motorfreight,air transport;Utilities: heavy construction; Transportation: Firms: telephone, electric,gas; Brokerage securitiesbrokers, holding& investmentcompanies,realestate agencies, insurance carriers;PersonalServices:power laundries, linensupply& cleaningservices, beautysalons & barbershops, photographic services; Business Services:advertising' agencies, credit & SIC Groupings': 15, 16, 17 42, 44, 45 48, 49 60 60 61 61 62, 65, 67 70 72 73 75, 76 78, 79 miscellaneous
reporting services, janitorial cleaning services, computer programming/data processing services, equipment rental & leasing services, consulting firms, photofinishing laboratories; Recreation: amusement parks, public golf courses, audio/video entertainment, membership sports and recreation clubs.

curred on items that had large enough overall mean scores to warrant discussion of the differences. The inability to mass produce services appeared to affect businesses serving institutional customers more than those serving individual customers. Costs of services appear to be more difficult to calculate as the duration

of benefits increases. Associating direct and indirect costs with the provision of a service evidently becomes less precise and more difficult as the service extends over a longer time period. Quality control difficulties were more salient to nonlocal than to local firms, possibly because nonlocal firms generally op-

Problemsand Strategies in Services Marketing / 37

TABLE 2
Significant Differences in Perceptions of Problem Areas among Types of Service Firmsa
Percentage o Firms Duration of Benefits PrimaryCustomer Group Geographic Spread CheckIndividual Institutional StatewideImme- Short- LongMeAll ing a 4 Customers Customers Both Local Regional Natl. Intl. diate term term High dium Low Firms or 5 2.15b 1.55c 1.85bC 1.87 16 (1.36) 9 1.65 (1.17) 2.22b 2.92c 2.53b,c 2.60c 2.52 20 (1.07) 2.41C 1.83b 2.01b 2.13 19 (1.32) Need for Customer's Presence 1.64b 2.09C 2.08bc 1.78 1.66 2.07b 2.27C 2.33b 2.44b'c 2.76c 1.89 (1.35) 2.59 (1.25) 2.13 (1.15) 16 23 12

Problem Areas Services cannot be stored. Services cannot be transported. Qualityof services difficultto control Services cannot be "mass produced." Services cannot be protected by patents. Costs of providing services are difficult to calculate. Customers themselves are involved during the production of services. The demand for services fluctuates. Sample Size

3.27 (1.29) 125 129 52 100 76 74 49 87 47 173 73 125 114 323

47

aNumbersare mean values on a 5-point scale, on which the higher the value, the more a characteristicapplies to a firm; numbers within parentheses in the second last column are standard deviations; numbers in the last column are percentages. with the same superscripts are not significantlydifferent. Means with differentsuperscripts are significantlydifferent. b'CMeans

eratea greaternumberof units that are more dispersed geographically. Nevertheless, quality must be carefully guardedbecause a bad experience in one outlet can affect business in other outlets. An importantfinding is the absence of significant differencesacross differenttypes of firms on the problem areathathad the highest mean score (3.27)-"the demandfor service fluctuates."Perceptionof demand fluctuationas a somewhat serious problem is apparently universal.

Practices/Strategies
Table 3 summarizesthe extent to which various business practices and strategies are used to overcome problemsassociatedwith services across all firms and in differenttypes of firms. These practices and strategies have been cited in the services marketingliteratureas particularlyappropriate for service firms. Pricing. Average responses across all firms show thatcost-oriented pricingstrategiesare used more than competition-and demand-oriented pricing strategies. Basing prices on what it costs to provide the service had a higher mean (3.78) than either basing prices on what competitioncharges (mean of 2.99) or on what the marketis willing to pay (mean of 2.90). Consistent with these averages are the percentages of respondentschecking a 4 or 5 on the scales (indicating thatthe strategyappliesto theirfirm):63% base prices on costs whereas a much lower percentagebase price

on competition(36%) and marketwillingness to pay (36%). Althoughservice costs may be difficult to calculate (accordingto the literature and, to some extent, the findings of this study), service companies are apparentlymakingestimatesof costs to be sure thatthey are covered. Competition-oriented pricing, although simpler,may not provideassuranceof covering costs. Demand-oriented pricing may be as difficult to imas cost-oriented plement pricing and does not guarantee that costs will be covered. Consistentwith the relative popularityof cost-oriented pricing, the use of cost accountingsystems appears to be moderately widespread (mean of 3.28). The only significant difference in pricing strategies among types of firms involves the use of cost accounting systems: local firms use the systems signiffirms, probably icantlyless thando statewide-regional because these firms tend to be smaller and less sophisticated. Advertising.The data pertainingto advertisingindicate significant differences in usage of advertising among types of service firms. As is usually the case with goods firms, service firms with institutionalcustomersreportedthat advertisingis not as importantto their marketingprogramsas firms marketingto consumers. Moreover, institutionalfirms report significantly lower usage of television and newspaper advertising, which tend to be consumer media. Firms whichrequirethe customer'sphysical presenceduring

38 / Journal of Marketing, 1985 Spring

TABLE 3
Significant Differences in Usage of Business Strategies
PrimaryCustomer Group Geographic Spread Individual Institutional StatewideBusiness Practices Customers Customers Both Local Regional Natl. Intl. Pricing Base prices on what it costs us Base prices on what competition charges Base prices on what market is willing to pay Use a cost ac3.02b 3.65c 3.19bc 3.48b'c counting system Advertisingand Word of Mouth 3.55b 2.69c 3.59b Advertising is an importantpart of marketing program
Television adver1.90b 1.42c 1.59b,c

among Types of Service Firmsa

Duration of Benefits Need for Customer's Presence Percentage of Firms Chec CheckAll ing a 4 Low Firms or 5 3.78 (1.27) 2.99
(1.22) 2.90 (1.37) 3.28 (1.49) 36 63

Imme- Short- LongMediate term term High dium

36

51

3.57b

3.08bc

3.02c

3.66b

3.29b

2.60c

3.20

45

(1.45)
c

1.95b

tising is important part

Newspaper ad3.23b

1.59b

1.48c

1.88b

1.74b

1.38c

1.65

12

(1.20) 1.75c 3.20b 3.31 2.47c 2.05c 2.02c 3.07b

2.69bc

vertising is important part Direct mail advertising is important part Specific effort to encourage customers to tell others about service Personal Selling Do a lot of personal selling of services Contact customers after purchase
Carefully choose

2.31

3.01b 2.84b

2.06c

2.61 (1.57)

35

2.82 (1.43)
3.99b

34 68

4.00b

2.60c

3.86 (1.30)

3.84 (1.44)

67

2.81b
3.98b

3.93

3.17b

2.72b

3.38c

3.81c,d

4.32d

3.35 (1.45) 4.11 (1.01) 4.08 (1.03) 3.78 (1.29)

50

4.31c

3.89b

3.94b

4.06b

4.12b

personnel who interactwith consumers Train personnel to interactwell InstitutionalImage Much of marketing geared to projecting specific company image Have customer contact employees dressed in a certain way to achieve image to achieve specific marketing or image objectives Quality Control for controlling quality Marketing Orientation
Regularly collect 3.23b Formal system
3.34b

4.52c

76

73

67

3.53b

3.23b'c

2.98c

3.24

50

(1.46)

Design facilities

3.63b

3.01

3.64b

3.78b

3.04C

3.15c

3.29C

3.66b

3.02C

3.30bc

3.74b 3.49b

2.98C 3.37 (1.44)

53

3.80C

3.37b

3.17a

3.57b

3.88b

3.87b

3.54 (1.25)

55

information about customer needs

3.97c

3.36b

3.20b

3.70C

3.72

4.21d

3.60 (1.28)

59

Problems andStrategies inServices / 39 Marketing

TABLE 3 (continued)
PrimaryCustomer Group Geographic Spread Individual Institutional StatewideBusiness Practices Customers Customers Both Local Regional Natl. Intl. Marketingactivities are based on knowledge about customers Firmactivities are coordinated to ensure customer satisfaction Chief marketing executive participates in top management decisions Willingto produce customerdesigned services for clients When a customer is dissatisfied, redo service Sample size 3.45b 3.89c 3.36b 3.32b 3.70C 3.83c 3.88c Percente ageof Firms Duration of Benefits CheckImme- Short- LongMeAll ing a 4 diate term term High dium Low Firms or 5 Need for Customer's Presence 3.75b 3.38c 3.84b 3.62 (1.19) 59

3.70b

4.22C

4.09c

4.23c

4.34b 3.78C 4.06b 4.00 (1.06)

72

4.34 (1.05)

84

3.23b

4.01c

3.40b 3.29

3.49b'c

3.93c

3.84c

3.59 (1.47) 2.70 (1.50)

60

31

125

129

52

103

76

74

49

87

47

173

73

125

114

323

aNumbersare mean values on a 5-point scale on which the higher the value, the more a characteristicapplies to a firm; numbers within parentheses in the second last column are standard deviations; numbers in the last column are percentages. with same superscripts are not significantlydifferent. Means with different superscripts are significantly different. b'c'dMeans

service delivery reportthat advertisingis more appropriate (and use both television and newspaperadvertising more) than those where the customer can initiate or terminatethe service transactionat a distance. Firms marketingservices where benefits are immediate (hotels) use television and newspaperadvertising morethanthose wherebenefitsendurefor a long time (landscapingfirms). A possible explanation for this finding is that services with enduringbenefits (a are moreexpensiveandrequiremore college education) involvementby the buyer. In these cases, advertising in the newspaper and on television is less likely to trigger a purchasethan with lower priced, lower involvementpurchaseswhere benefits are immediate(a restaurant meal). For the sample as a whole, direct mail and newspaperappearto be more importantadvertisingmedia than television. While 35% of the respondentsindicate thatnewspaperis important and 34% indicatethat direct mail is important,only 12% claim that television is an importantpart of their marketingprograms (see final column of Table 3). Television's advertising strengths-which include demonstrationas well as sight, sound, and motion benefits-may be less appropriatefor services because of their intangibility. Unless a service is associated with relevant tangibles (the equipmentin a healthclub), the service firm may have little to demonstrate. Television, generally the most expensive medium, may also not be feasible for many service firms.

Respondent firms report attempts to encourage word-of-mouthadvertising, a finding consistent with the emphasisplaced upon this activity in the literature andJones (BessomandJackson1975;Davis, Guiltinan, 1979; Fisk 1981). The average response of 3.86 on the item, "We make a specific effort to encourageour customersto tell other people about our service," indicatesthat many service firms place a high degree of on word-of-mouth communications. importance Sixtyeight percentof the respondentschecked a 4 or 5 on this item. Personal selling. Average scores for all firms on the usage of personalselling and image creatingstrategies reveal particular emphasis in these areas. Overall, respondentfirms appearto choose carefully their customercontact personnel (4.11) and to train them to interactwell with customers(4.08). These high averages are consistent with high percentages of respondentschecking a 4 or 5 on these items: 76% report careful selection of personnel and 73% report trainingthem in interactionskills. Firms that sell to institutional customersreportgreatercare in choosing personnel(4.31) than firms selling to individualcustomers(3.98), perhaps becausethereis frequently more on each sale to institutional customers. riding Also, internationalfirms indicate greater care in selecting personnelthan firms which operateat local, regionalstatewide, or national levels. This result may be due to the largenumberof people many international firms

40 / Journal of Marketing, 1985 Spring

employ, necessitatingmore sophisticatedhiring practices. Institutionalimage. Overall, firms appearto emphasize designing facilities to achieve specific marketing or image objectives (3.57), dressing customer contactpersonnelin a certainway (3.24), and gearing much of their marketingto projectinga specific company image (3.78). Differences among types of firms surfacedmainly in terms of facilities design; on this item, significantdifferences occurredin all four classifications. As might be expected, service firms which emphasize facilities design most are those the consumer visits: firms whose primarycustomer group is individual customers (travel agencies), whose geosalons), whose bengraphicscope is local (haircutting efits are immediate (child care centers), and whose need for the customer'spresenceis high (healthspas). Customerorientation. Items meant to reflect the orientation of respondent firmsdrew degreeof customer mixed responses. High mean scores on items such as coordinatingactivities to ensure customersatisfaction (4.00) and involving marketing executives in top managementdecisions (4.34) indicate marketingsensitivity. However, lower scores obtained on other marketingorientationitems, such as performingthe service over if the customeris dissatisfied (2.70), reveal less sensitivity to customer needs. Analysis revealed a number of differences between types of firms. Nonlocal firms, perhapsdue to greaterresourcesat theirdisposal, seem more inclined to researchcustomer needs than local firms. Institutional firms also seem more inclined to do customer researchthan consumer firms. This finding may be explained by the long-term relationshipsthat need to be cultivated with institutional customers, but it is contraryto studies in goods marketing,indicatingthat consumerfirms are more prone to conduct customer research than institutional firms (see, for example, Cooper and Little 1977, McNamara 1972). In general, service firms serving institutionalcustomers appearto be more marketingorientedthan service firms serving end consumers. Strategies to cope withfluctuating demand. Table 4 presentsaverage responses for all firms concerning the use of strategiesto cope with fluctuatingdemand as well as differencesamong types of firms. Strategies for peak demand periods which apply most to the samplefirms include hiring extrapart-timeemployees (3.55), having employees work overtime (3.54), and cross-training employees (3.73). Peak-time strategies which apply least to respondentfirms include letting work fall behind (1.62), taking care of regular customersfirstandallowingothercustomers to wait (1.68), turningaway business(1.68), and subcontracting work to others (1.95). These inferences are confirmed by

the percentagesof firms checking a 4 or 5 on each item (final column of Table 4). The most prominentstrategyfor respondingto periods of low demandinvolved trying to increase business by calling on customers (3.47). A surprising finding is that many service firms apparentlydo not reduce prices to increase business during slow periods:offeringprice reductions scoredbelow 2.0. Only 17%of the respondentschecked 4 or 5 on this item, indicating that a minority of firms use the strategy. Nor is new service developmenta prominentstrategy: offeringdifferentservicesto use resourcesduringslow periods scoredjust above 2.0. Considerable in usage of strategies variation to cope with fluctuatingdemand existed between firms serving end consumersand firms serving institutionalcustomers. Consumer firms scored higher than institutional firms on only two strategies:differentialscheduling of employees and educationof customersto use services during nonpeak times. Firms serving institutional customers, on the other hand, had significantly higher usage scores on eight strategies. Institutional firms, which typically have sales forces, showed sharplygreaterusage of the strategy, "Tryto increasebusiness by calling on customers,"than consumer firms. Institutionalfirms also reportedsignificantly higher usage of several employee hiring and scheduling strategies: letting employees work overtime, hiring extra full-time employees, and laying off employees. Finally, institutionalfirms reported significantly higher usage of strategies such as turning away business, taking care of regularcustomers and allowing others to wait, seeking subcontract work during slow times, and offering different services to use resourcesduringslow periods. While mean scores for these last four strategieswere low, the dataoverall suggest that institutionalfirms use a more varied repertoire of strategiesto cope with fluctuatingdemand than do consumerfirms. Strategiesto synchronizesupply and demandvaried most by geographicscope of operations with usage of 12 of the 19 strategies showing significant differences across categories. National firms appearedto make the greatestuse of the strategies, scoring higher than firms in other categories on seven of the strategies (i.e., differentialscheduling of existing employees, taking care of regular customers and allowing othersto wait, cross-training employees, offeringprice reductions,increasingadvertising,turningaway business, and calling on customers). Size and sophistication of national firms most likely account for their higherusage of strategiesto cope with the problemof fluctuatingdemand. A numberof significant differences were also revealed in terms of durationof benefits (usage of the strategieswas generallyhighest in the immediateben-

Problems andStrategies inServices Marketing / 41

TABLE 4
Significant Differences in Usage of Strategies to Cope with Fluctuating Demand'
Need ~Need for Customer's Duration of Benefits Presence MeImme- Short- Longdiate term term High dium Low Percentage of Fom CheckAll ing a 4 Firms or 5

PrimaryCustomer Group Geographic Spread trti to Cope C Strategies with Fluctuating Individual Institutional StatewideDemand Intl. Customers Customers Both Local Regional Natl. Periods of High Demand Hireextra full-time 3.12c 2.62b,c 2.16b 3.37C 2.96c 3.23C employees Hireextra part-time employees Use differential 3.20c 3.75b 3.40b'C 3.73c 3.90c 3.05b scheduling of existing employees during peak times Have employees 4.00C 3.24b 2.97b 3.26b 3.66C 4.05c 4.10C work overtime Subcontractwork to others Let work fall behind Take care of regu1.47b 1.47b 1.99C 1.92C 1.53b 1.85c 1.65b,c lar customers and allow others to wait Turn away business 1.48b 1.39b 1.33b 2.00 1.85C 1.92C 1.88c Cross-trainemployees to perform other tasks Educate customers to use service during nonpeak times Offer incentives to customers using service during nonpeak times Periods of Low Demand Lay off employees Use differential scheduling of existing employees during slow
times
3.84b 3.75b 3.90 3.22C

3.13b 3.96b 4.00b 4.35b

2.50C

2.85b,c

3.42c 4.11b
4.03b

3.09C

3.33c

3.43c

2.79 (1.61) 3.72 (1.44) 3.55 (1.52)

37 63 60

3.54 (1.38) 1.95 (1.41) 1.62 (0.93) 1.68 (1.09) 1.68 (1.17) 3.73 (1.26)

55 18 6 9

2.00b

1.47C

1.70b'c

11 60

1.99C

2.78b

2.38
(1.37) 1.97 (1.38)

22

2.75b

1.69c

1.62c

2.69b

1.61c

1.81c

18

2.96c

2.04b

1.88

2.97c

3.08c

3.14c

3.00b

2.88b' 3.88b

2.35c

2.60 (1.56) 3.69b 3.03c 3.18C

32 50

3.72b

2.77C

3.22
(1.51)

Use employees to perform nonvital tasks during slow times Offer price reductions Increase advertising Try to increase business by calling on customers Seek subcontract work during slow times Offer different services to use resources during slow periods
Sample size
4.13c 3.35b

2.99 (1.38) 2.05C 2.46c 3.63C 2.47C 2.58C 4.00C 2.05c

2.28b,c 3.72C

39

1.50b
1.99b

2.27b 2.61b

1.80c 2.10

1.59c

2.66b 2.75b

1.72C

1.68c

2.15c

2.12c

2.09c
3.79

2.96b

3.34b,C 3.27b

1.94 (1.40) 2.70 (1.34) 3.47 (1.52) 1.72 (1.20) 2.08 (1.37)

17 20 57

2.07

1.48b

1.35b

1.90c,d

1.73b,d

2.33c

14

1.94b

2.38c

1.75b

1.74b

1.97b,

2.42c,d

2.60d

19

125

129

52

100

76

74

49

87

47

173

73

125

114

323

'Numbers are mean values on a 5-point scale, on which the higher the value the more a characteristicapplies to a firm. Numbers within parentheses in the second last column are standard deviations; numbers in the last column are percentages. with the same superscriptare not significantlydifferent. Means with differentsuperscripts are significantly different. b'c'dMeans

efits category)and need for customers'presence(firms which directly interact with the consumer use the strategiesmore). In seven of the eight strategieswhere

significant differences occurred, companies that had a high need for the customer'spresence outscoredthe other two categories in usage of strategies to syn-

42 / Journal of Marketing, 1985 Spring

chronize supply and demand. These findings are perhaps as one would expect them to be-the need to match supply with demand is more urgent when customersare at the service site, waiting to be served (in a bank or restaurant) than when the customers' physical presence is not critical and the service benefits endureover a longer period (architectural services).

Discussion
This article presented a conceptual framework of problemsand strategiesin services marketingthat derive from four unique characteristicsof services: intangibility, inseparability,heterogeneity, and perishability. The frameworkis based on a review of the growing body of literaturein services marketing.The article also reportedfindings from a national survey of service firms concerning problems they face and the literature review and strategies they use. Presenting data in one article affords the survey opportunityto of in the literature-much compare points emphasis of which is nonempirical at this stage in its development-with the input of a cross-section of service
companies.

firms are also more aggressive in respondingto low demand periods (by being more inclined to call on customersto try to increase business) as well as high demandperiods (by being more likely to let employees work overtime). While it is useful to generalize about the characteristicsof services and service businesses, it appears to be equally importantto recognize that differences exist among variousservices and among the firms that marketthem. While possible explanationsfor the differences revealed by the study have been offered, research investigating the causes and consequences of such differencesis needed. Lovelock (1983) has provided a rich conceptualfoundationfor such research efforts.

Services MarketingProblems
Anotherconclusion to be drawn from the researchis thatthe services marketing literature more corresponds with the and used closely practices strategies by samfirms than with the face. ple problemsthey Eight operations or marketingproblems associated with the characteristicsof services were identified from the services marketingliterature. Only one of the eight problemareas ("The demandfor services fluctuates") received an average score above the midpointon the scale. Four of the eight items were just below or just above the 2.0 mark, indicatingthatthey were not perceived to be troublesome. A discrepancyexists between what the literature suggests would be the case and what respondentsto the present study claim is the case. One explanation for this discrepancyis that service firms have internalizedthese problemsand are dealing with them successfully by using the very strategiessuggested in the literatureto be appropriate.That there were, by and large, higher overall scores for the business practice and strategyitems than for the problem items on the lends credenceto this explanation.If this questionnaire is explanation valid, many of the problems cited in the literature couldbe less criticalthanotherareaswhich were not investigated (e.g., difficulty in developing new services, difficulty in evaluating profitability, difficultyin motivatingpublic contactpersonnel,etc.). It is also possible that service managersmay not have fully graspedthe significanceof what they were being asked in one or more of the problemstatements(e.g., managersmay not think in terms of protectionin the formof patentsbut still may be concernedaboutcompetitorscopying their services). The services marketing literaturemay need to recognize and analyze additional problem areas that may be particularly troublesome to service firms. Researchers testing managerialperceptionsmay also need to translatethe conceptual problem statements into language more to service managers. appropriate

Differences Among Service Firms One conclusion that can be drawn from the findings is thatimportant differencesexist among service firms, not just between service firms and goods firms. The existing literatureis dominatedby discussions of the differences between goods marketing and services marketing.Much less has been written about the differences among service firms. In this study, respondent companies were classified four different ways: by primarycustomer group, geographic spread, duration of benefits to the customer, and need for the customer'spresenceduringservice production.As the data reveal, many significant differences surfaced amongservice firms when classifiedaccordingto these criteria, especially with respect to usage of practices and strategies. As an illustration,firms marketingto institutional customers differ from firms marketing to end consumers in several important ways. Consistent with goods marketingpractice, advertisingappearsto be a less importantpart of institutional firms' marketing programs.However, somewhat at odds with what we know about goods marketing practices, institutional firms seem to be more marketingoriented: they are moreapt to contactcustomersafterpurchaseto ensure satisfaction,to choose carefully the personnelwho interact with customers, and to regularlycollect information about customer needs. One possible explanation for this difference is that customers are fewerand each customer spends more-in the institutional marketthan in the end consumermarket. Institutional

Problems andStrategies in Services / 43 Marketing

Implicationsfor FurtherResearch
Numerous implications for researchersinterested in services marketingarise from the findings reportedin this article. Some of the more intriguingimplications are as follows: 1. The services marketing literaturetends to be characterized by empiricalresearchwithin certain service industries (for example, banking andhealthcare) andby conceptualwork across service industries. It is perhapsthis combination that has contributedto the glossing over in the literatureof many differences between types of service firms found in our study. A researchpriority in services marketingis empirical study that transcendsspecific industries and tests service marketingconcepts. 2. For reasonssuggestedearlier,this research study did not for the most part uncover the critical problemsfacing most service businesses today. Whatare these problems?How are they changing due to environmental, competitive,andother conditions? How do they differfor varioustypes of service firms? The services marketing literature needs to focus on the most critical problems facing service firms if it is to be of maximumvalue. 3. Of the eight problem areas investigated, fluctuation in demand was considered to be most troublesomeby the sample. This would seem to be a fertile area for additionalresearch.The datapresentedin Table 4 reveal thatthe sample companies used some but not all of the listed strategiesfor coping with demandfluctuations. Why are some strategiesmore useful than others? How does their effectiveness vary among different types of services? Are other useful strategiesoverlooked in the literature? 4. The literature suggests that word-of-mouth communications are critical because services are intangibleand heterogeneous in nature.The data indicate that sample firms make specific efforts to encourage word-of-mouth communications. What strategiesare available to service finns attempting to increaseword-of-mouth communications?What guidelines and advice can be offered in connectionwith these various strategies?Are certain strategies more appropriate for certain types of service businesses? Additionalresearchinto these and relatedquestions would be helpful. 5. Also suggested in the literature(Kotler 1973, Lovelocket al. 1981)-and corroborated by this study-is the importanceof institutionalimage and the use of tangiblecues like physical facilities and personnel appearanceto enhance it.

Additional investigation of such issues as the use of employee uniforms, the role of architecture in the marketingmix, and the nature and building of corporateimage would be useful to many service companies. 6. The emphasis placed on selection and training of service firm personnel in the literature,and by respondentsin the study, raised provocative issues aboutmarketing Shouldthe organization. marketingdepartmentcontrol employee training? Does the entire humanresourcesfunction belong in marketing?Conversely, would it be more appropriatein certain service firms to consider field managersas the chief "marketers" and decentralizemarketingratherthanadd functions to a central staff (Gronroos 1983)? These and other issues touching on employee performanceand marketing'srole in facilitating it are worthy of much additionalwork. 7. An unexpectedfinding of this study is that service firms dealing with institutionalcustomers are more marketingorientedthanfirms dealing with the end consumer: they are more apt to contact customersafter purchaseto ensure satisfaction,to choose carefullythe personnelwho interactwith customers, and to regularly collect informationabout customerneeds. Why is this finding differentfrom what we would expect based on our knowledge of goods firms? What aspects of services lead to this reversal in the importanceof marketingorientation?

Conclusion
Services marketingis becoming a recognized and accepted subset of the marketingdiscipline. Given the growthof the service sector in economies throughout the world, and the almost universalbelief by scholars workingin this area that services marketingis in certain key respects differentfrom goods marketing,the rapidgrowth of service marketingliteraturein recent years is not surprising.An accelerationof academic interestand researchactivity in services marketingin the years immediatelyahead is to be expected and is becausefar morequestionsthananswersexist necessary at this time. Implied by the set of research implications reviewed above is the need for researchersto thinkbroadlyaboutresearchable issues and to be willto work in areas not ing normallyclassified as "marhuman resources keting" (e.g., managementand facilities design). A need exists for services marketing researchto enter a new phase of empirical work that integratesvarious disciplines and various service industries.

44 / Journal of Marketing, 1985 Spring

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46 / Journalof Marketing, Spring1985